Is It Time To Consider Florida Home Mortgage Refinancing of Your ARM?
We’re entering the period where rates on billions of dollars in adjustable Florida home mortgage loans will reset. As a result, countless individuals are wondering about the state of their finances and asking themselves whether or not refinancing into a fixed rate is in order.
It’s an important question.
The decision to refinance out of a 5/1 adjustable rate mortgage, for instance, into fixed rate product depends on how long you plan on being in your house, your attitude toward risk and your outlook on interest rates.
If this is a starter home or you plan to downsize in the next three to five years, then staying in a 4.5 percent loan over the next three years makes perfect sense. If you don’t ever plan on moving, however, then you should at least consider Florida home mortgage refinancing while 30-year fixed rates are still under 7 percent.
There’s more to consider on the topic.
Let’s say your mortgage has an annual cap of 2 percent and a lifetime cap of 9.99 percent; it would be at least 2010 before your Florida mortgage rate could hit 8.5 percent. While that’s about 1.75 percent higher than current 30-year fixed-rate mortgages, you’re not paying any refinancing costs or expenses to stay in your current situation. What’s the worst that can happen?
Your loan could go to 9.99 percent in 2011 and stay there for the rest of the Florida mortgage loan term. That’s not inconsequential, but isn’t relevant if you don’t plan on staying in the house.
Let’s do some more math.
It’s a rough approximation, but if your loan balance is currently $100,000, refinancing a 4.5 percent loan three years before it becomes an 8.5 percent loan costs you $8,000 per year over the next three years. That’s $24,000, plus closing costs. Refinancing today at 7 percent will cost you an additional $7,500 over the next three years, versus the existing mortgage, plus closing costs. The interest expense is scalable, so a $200,000 loan balance would be twice as much, plus closing costs.
Overall, keep an eye on the 10-year Treasury note. It’s used as the benchmark in pricing fixed-rate mortgages. It’s been in a range from 4.75 percent to 5.25 percent since March of 2006.
The bottom financial line, though, is this: if you’re not in this house for the long term, don’t get overly concerned about Florida mortgage refinancing your 5/1 ARM or any similar, exotic products.
